I belive this can be done quite trivially using the native XP cmd shell (see the extended FOR command options and environment variable string substitution). It should look something like the 1 liner below.
@echo off && (for /f "tokens=*" %I in (oldplaylist) do ((set z=%I) && (echo !z:badpath=goodpath! >> newplaylist))) && @echo on
** Make sure you run cmd /E:ON /V:ON first to enable command extensions and delayed environment variable expansion
It can definitely be done trivially within the Windows Script Host hosted languages (VBScript,...). It's too late for me to start this 10 minute task (likely to become hours).